China

China

Two levels of wind power contracting

1 September 2006

Government issued concession contracts for individual wind farm projects have so far provided the major impetus for China's wind power market, but a secondary market based on individual power purchase contracts negotiated with local authorities is growing. Since the start of the year, projects amounting to several thousand megawatt have been announced alongside the concessions granted by the National Development and Reform Commission.

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Joint ventures with regional authorities are driving the Chinese wind market as much as the government's centralised system for granting project development concessions

Government issued concession contracts for individual wind farm projects have so far provided the major impetus for China's wind power market, but a secondary market based on individual power purchase contracts negotiated with local authorities is growing. Since the start of the year, projects amounting to several thousand megawatt have been announced alongside the concessions granted by the National Development and Reform Commission (NDRC).

Among them, Canadian holding company Vitasti, which acquired fellow Canadian Welwind International Energy Corp in May, has secured a land lease for a 600 MW wind farm in Zhanjiang, Guangdong, in South China. Construction on the first 50 MW is underway. Welwind is also conducting wind assessments at other sites in China and says it expects to build over 1000 MW.

Similarly, Australian wind developer Roaring 40s has announced a number of deals and has signed an agreement for joint wind project development with Guohua Energy Investment Corporation. Three 50 MW plants are planned initially, one in Hulunbeir Prefecture, Inner Mongolia, one in Rongcheng, Shandong, with the third yet to be announced. Hulunbeir, now building, is due for completion at the end of the year, with the 33, 1.5 MW turbines supplied by Dongfang Steam Turbine Works, which partners German wind turbine maker Repower. In a further deal with Guohua, Roaring 40s is developing a 48.75 MW wind farm near Rongcheng on China's east coast. Construction will start later this year and full commissioning is expected by the end of 2007. Guohua owns 51% of the project and Roaring 40s 49%.

Meanwhile, China's biggest wind developer, Long-yuan Electric Power Group, has joined with the county government of Weichang in Hebei province to develop 1600 MW. Weichang, located north of Beijing and bordering Inner Mongolia, has rich wind resources. Long-yuan says it plans to commission 50 MW in 2007, 100 MW in each of the following three years, 150 MW in 2011, and the remaining 1100 MW thereafter. The deal is a significant part of Longyuan's plan to develop 3000 MW of wind capacity by 2010 and 7000 MW by 2020.

As well as Hebei, Longyuan is working on development of a further five 1000 MW plus wind power bases, in Xinjiang, Gansu, Inner Mongolia, and the Northeast and Southeast of China. It also says it has struck deals with 11 further local governments in Gansu, Xinjiang, Inner Mongolia and Hebei for a total of 3000 MW. This year it says it will commission 400 MW and will have launched 500 MW of new projects.

Another regional authority keen to get into wind is Guangdong in the south. It wants to install 700 MW by end-2010 and 3000 MW by 2020, a third from offshore facilities, according to a draft planning document submitted to central government by the provincial Development & Reform Commission. The coastal province has abundant wind resources. Its exploitable wind energy on land is estimated at about 75,000 MW while offshore there is potential for 100,000 MW. By the end of 2005 the region had six wind farms with a combined capacity of 140.54 MW -- just over 11% of the national total.

Concessions market

Under the central government's system of inviting tenders for concession contracts, which kicked off in 2003 (table), some 2200 MW across 13 projects have been announced so far. The first two 100 MW projects -- Rudong Phase I in Jiangsu and Huilai in Guangdong -- are due for commissioning this year. Rudong is being supplied with 50 Vestas 2 MW machines and Huilai with 167 Goldwind 600 kW turbines.

The Vestas order is one of just three awarded to non-Chinese firms, GE Energy and Gamesa winning the other two in 2004. The bulk of the 1350 MW of contracts granted so far have gone to leading local turbine manufacturer, Goldwind and its main rival, Dalian Heavy Industry. Goldwind has secured orders for four of the nine projects, totalling just under 440 MW, and Dalian Heavy Industry has won two for 400 MW in total. Shanghai Electric Company, meanwhile, is supplying 40, 750 kW machines to one 100 MW project, with Goldwind supplying the other 93 turbines, also rated at 750 kW.

The latest tenders were issued in April to supply 700 MW of turbines for three projects: the 200 MW Danjinghe wind farm in Zhangbei, Hebei, the 300 MW Huitengliang wind farm in Xilin Gol, Inner Mongolia, and the 200 MW Bayin wind farm in Baotou, also in Inner Mongolia. All three sites are in North China, close to Beijing. The winning bids are due to be announced soon.

In contrast to previous tenders, this year NDRC imposed a number of new conditions. A company wishing to undertake a wind concession project must select a turbine supplier prior to casting the bid and turbines used must be at least 750 kW or larger. Moreover, the selected supplier needs to pledge in writing to deliver machines that meet the 70% local content mandate, a condition which has seen the world's leading suppliers all rush to set up manufacturing facilities in the country.

As well as the state tenders, NDRC has somewhat controversially also awarded projects this year without putting them out to tender. In February, it awarded three 200 MW wind projects, all in Yancheng, Jiangsu, in east China, to three state-owned energy companies. The companies -- Guangdong Nuclear Power Holding, Huadian Power International, and the Three Gorges Corporation -- are all to receive a fixed rate of CNY 0.487/kWh ($0.061/kWh). The rate equals the price applied to the Dongtai Wind Farm, a state concession project in Yancheng tendered in 2005.

Offshore too

Offshore potential has also caught the eye of the Three Gorges Corporation, owned by the state. While the company has been awarded a 200 MW project in Yancheng, Jiangsu, by NDRC, it is planning to conduct wind measurements in East China and areas rich in offshore wind resources. As the developer and operator of China's largest hydro power station and with hydro power as its core business, its expertise in water-related engineering has given it the confidence to tap the offshore wind market, it says. It has signed agreements with a number of county governments in East China's Zhejiang province for strategic cooperation in developing offshore wind farms. Meanwhile, it has established a new subsidiary company, Changjiang New Energy, to handle the business of wind development and other new energies.

Dongfang Steam Turbine Works, Repower's Chinese partner, is also looking offshore. It has signed an agreement with the City of Qingdao in Shandong province to develop five Repower 5 MW turbines near the venue of the 2008 Olympic Games sailing events. Site water depth is around 20 metres.